Four years after buying back oil lease, state considers allowing drilling

In 2005, Gov. Jeb Bush and members of the Cabinet proclaimed victory for Florida when they agreed to pay Coastal Petroleum Co. $12.5 million not to abandon its leases for drilling oil off the Gulf of Mexico.

With Florida leaders now deciding whether to debate reopening state waters to drilling, some who were involved in the Coastal Petroleum issue say there are lessons from that dispute four years ago that should be revisited.

In 1947, the state granted leases to Coastal for exploration and production rights in state waters within 10 miles of the Gulf Coast. The lease extended from Franklin County on the Florida Panhandle to Pasco County north of Tampa.

Coastal Petroleum's drilling operations ended in the 1970s with a series of dry holes, according to legal documents. But with a state ban on oil drilling approved in 1990, Coastal filed suit against Florida saying that the ban constituted a taking of its royalty and leasing interests.

Coastal and Florida battled it out in court, with Circuit Judge L. Ralph Smith ruling in 2002 that the company was owed nothing because an earlier settlement agreement required it to comply with environmental laws before the state could issue a drilling permit.

AN "INCREDIBLE" SETTLEMENT

But certain owners of royalty interests in Coastal leases continued to sue. So when the Cabinet agreed in 2005 to pay $12.5 million for the leases, Gov. Jeb Bush praised the resolution as "incredible." Then-Attorney General Charlie Crist and other Cabinet members voted in favor.

"This landmark settlement agreement eliminates the potential for drilling activities in state waters under lease -- without the prospect of protracted and unpredictable courtroom battles," Bush said in a statement released after the Cabinet meeting. "Taxpayers are protected from hundreds of millions of dollars in takings claims while Florida's waters and beaches are safeguarded from the threat of coastal drilling."

Today, drilling supporters say that oil production will provide jobs and state revenue and can be done safely without harming the environment. Supporters include Associated Industries of Florida, the Florida Chamber of Commerce and the Florida Petroleum Council.

But opponents say no one has proven that drilling can be done safely, or that there is actually oil and gas to be found in the eastern Gulf of Mexico, as reflected by the Coastal legal fight.

Crist now says he supports offshore drilling if the coast can be protected -- but he hasn't endorsed any proposal that shows how that can be done. He opposed a House bill earlier this year that would have allowed drilling within three miles of the coast, but he has said he supports taking up the drilling issue again in a special session this fall.

'CON GAME' OR CHANGE OF MIND?

Monica Reimer, a former assistant state attorney general who represented environmental groups in the Coastal Petroleum case, said the current debate over oil drilling feels like the Coastal issue all over again, with companies in the future again positioning themselves to sue the state over new leases that would be issued. Coastal Petroleum, she said, was never about drilling, it was about litigating.

"This story they (drilling supporters) are telling has such a feel of a con game," said Reimer, an attorney in the Earthjustice law firm's Tallahassee office. "The idea suddenly billions of dollars will be produced -- it doesn't work that way. If it did, we would have been an oil state a long time ago."

But Bob Angerer, chairman of the board for Coastal Petroleum and parent company Coastal Caribbean Oils and Minerals, said the reserves off Florida's coast are enormous -- as suggested in a 1999 article in Oil and Gas Journal -- but they were not drilled because the state would not grant permits. He said the dispute and Florida's drilling ban were shortsighted.

"All it took for people to change their minds was to see the price of gasoline at $4.50 (per gallon)," he said. "People say it was the housing market that ruined our economy. I beg to differ. It was the price of energy -- which affects everything -- that brought the economy down."

THE PRICE OF POLITICS

David Mica, executive director of the Florida Petroleum Council, said he doesn't think the state's legal fight with Coastal means that drilling should not be allowed -- only that areas should not be leased as they were by the state in 1947. He pointed out that Coastal originally had a lease that provided mineral rights in various Florida waterways.


Those mineral rights led to Coastal's initial lawsuit in 1968 after the Corps of Engineers, at Florida's request, denied the company's permit request to explore for limestone in Lake Okechobee. Coastal was unable to secure investments to drill for oil after 1977.

"A lesson from Coastal is you don't want to lease giant swaths of all state waters at one time to one entity," Mica said. "What it did was monopolize a lot of the waters that were potentially resource-rich to one entity who for a long time did not have resources or had limited resources to do anything."

Mark Ferrulo, an environmental activist who has fought offshore drilling in Florida efforts since 1991, said the dispute points to the influence that money is having in the current drilling debate. He is director of Progress Florida, which opposes drilling.

Between the start of April and the end of July, Energy Associates spent $234,000 on legal work and lobbying and the Florida Legislature, according to the Miami Herald. The group also has contributed $35,000 to Republicans and $20,000 to Democrats.

The Coastal Petroleum dispute "certainly shows the 180-degree shift that many of our policy-makers have taken on this fight," Ferrulo said. "It just shows the effectiveness of spreading hundreds of thousands of dollars around Tallahassee -- what that gets you in the Legislature."

He continued: "I see a direct correlation between the amount of money these Texas oilmen are spreading around our Capitol and the amount of traction they are getting on this issue."

(Map courtesy of Coastal Petroleum. Photo and story copyrighted by Bruce Ritchie and FloridaEnvironments.com. Do not copy or redistribute without permission.)